ECON3430 Managerial Economics – Start-up Report
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Studdy AI Inc




Start-up Company Report

Word Count: 4000 words (not including appendix, references, equations, tables or
appendices)

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Contents
Abstract / Executive Summary .......................................................................................... 4
1.0 Introduction .................................................................................................................. 6
1.1 Company Vision ........................................................................................................ 6
1.2 Market Problem ......................................................................................................... 6
1.3 Product / Solution ..................................................................................................... 7
1.3.1 Homework Assistance ....................................................................................... 7
1.3.2 Product Demonstration and Comparison 1 ...................................................... 8
1.3.3 Product Demonstration and Comparison 2 ...................................................... 8
1.3.4 Product Summary .............................................................................................. 9
2.0 Consumer ................................................................................................................... 10
2.1 Target Consumer .................................................................................................... 10
2.2 Potential Market / Demand ..................................................................................... 10
2.3 Traction ................................................................................................................... 11
2.3.1 Number of Users and User Ratings ................................................................. 11
2.3.2 Social Media Following .................................................................................... 12
2.3.3 Studdy Affiliate Program .................................................................................. 12
2.3.4 Secondary Promotion Strategies .................................................................... 12
2.3.5 Traction Review ................................................................................................ 13
3.1 Founders and Key Personnel ................................................................................. 14
3.1.1 Co-founder & CEO – Michael Lam ................................................................... 14
3.1.2 Co-founder & CTO – Alex Lanzoni ................................................................... 14
3.2 Personnel Management & Hiring ........................................................................... 14
3.3 Ownership ............................................................................................................... 15
4.0 Market Structure ......................................................................................................... 16
4.1 Market Structure & Density .................................................................................... 16
4.2 Macro Trends .......................................................................................................... 16
4.3 Legal/Regulatory Environment .............................................................................. 17
5.0 Business Model .......................................................................................................... 18
5.1 Company Business Plan ........................................................................................ 18
5.2 Pricing Structure ..................................................................................................... 18
5.2.1 Studdy’s Pricing Structure ............................................................................... 18
5.2.2 Competitors Pricing Structure ......................................................................... 19
5.2.3 Pricing Structure Review ................................................................................. 19
6.1 Assumptions ........................................................................................................... 21
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6.2 Company Valuation ................................................................................................ 21
6.3 Recommendation .................................................................................................... 22
7.0 Conclusion ................................................................................................................. 22
Reference List .................................................................................................................. 24
Appendix .......................................................................................................................... 28
Appendix 1: Extract of ECON3430 Managerial Economics Tutorial 12: Practice
Problems Q1 with Solutions ........................................................................................ 28
Appendix 2: Extract of Studdy AI’s Solution to ECON3430 Tutorial 12 Q1 ................ 29
Appendix 3: Extract of ChatGPT’s Solution to ECON3430 Tutorial 12 Q1 ................. 31
Appendix 4: Extract of ECON3430 Managerial Economics Tutorial 12: Practice
Problems Q3 with Solutions ........................................................................................ 32
Appendix 5: Extract of Studdy AI’s Solution to ECON3430 Tutorial 12 Q3 ................ 33
Appendix 6: Extract of ChatGPT’s Solution to ECON3430 Tutorial 12 Q3 ................. 34
Appendix 7: Overview of Studdy Job Ads. ................................................................. 35



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Abstract / Executive Summary
Studdy AI Inc (Studdy) is an American AI software start-up, launched in August 2023
and a part of the Y Combinator batch S23 (Y Combinator, 2024a). Studdy's leadership
includes co-founders Michael Lam and Alex Lanzoni, who bring a wealth of experience
in AI, education, and software development. The company co-founders are concerned
with educational outcomes and hope to generate positive social impact through their
paid subscription service. Using their smartphone application, users can take photos
of questions on a range of topics and then promptly receive detailed answers (Studdy
AI, 2024b). Studdy’s target market is students globally primarily in primary education
K-12 but also supports further education students in numerous languages, highlighting
its global appeal.
In Australia, the educational sector faces significant challenges, including teacher
shortages and decreased student attendance, exacerbated by the COVID-19
pandemic (Australian Curriculum Assessment and Reporting Authority, 2024). Gaps in
early education have long-term negative impacts on students’ academic and personal
development. Studdy’s mission is to provide a personalised AI tutor for every student,
aiming to bridge gaps in traditional educational frameworks by providing tools to
support self-study on demand. Despite some concerns regarding AI tools, such as the
capacity to provide misinformation and the potential to compromise data security
(Kleinman, 2024), the industry shows great promise with an expected market growth
of 28.46% (Statistica, 2024). Increasing uptake of AI tools is seen in business, with
organisations capitalising on the productivity benefits they can provide (Taylor, 2023).
The general increase in demand for AI tools, combined with Australia’s growing
population and government's intention to increase the skilled workforce highlights
incredible market demand (Clare et al., 2024).
Studdy is in the pre-seed funding stage, having raised $2.3 million from several
investors, including K20 Fund, MPG Fund, and Neer Venture Partners (Studdy, 2024a).
While only minimal public information is available on its company structure and
financial position, the company appears to be in its early stages of growth and is
currently hiring key personnel to support its expansion (Y Combinator, 2024a). When
compared to its primary competitors such as ChatGPT, Photomath, and Chegg,
Studdy’s market share is minimal. The service it offers is also comparable to ChatGPT,
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and not free from error, despite Studdy emphasising differentiating features such as
the ability to answer questions from a photo. As students are highly price sensitive and
ChatGPT is a free service, this is Studdy’s primary competitor. Despite Studdy’s
potential, analysis does not suggest sufficient traction and, given the huge opportunity
cost and risk associated with investing, it is not currently recommended.


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1.0 Introduction
Part of the Y Combinator batch S23, Studdy AI Inc (Studdy) launched in August 2023
as an American software start-up company (Y Combinator, 2024a). Throughout this
report, Studdy’s investment viability will be assessed. Firstly, the company and its
proposed value-add will be outlined, followed by a decomposition of potential demand
and target consumers, company structure, market structure, and business model. This
analysis will be utilised to assess Studdy’s capabilities as a new entrant in the market
and its financial viability. For comparison, Photomath, ChatGPT, and Chegg, similar
and pre-existing apps in the market, will be used. Finally, valuation and investment
advice will be provided.
1.1 Company Vision
Studdy’s mission is “to unlock the full potential of the next generation by providing a
personalised AI tutor for every student” (Studdy, 2024a). When advertising to potential
employees, Studdy refers to itself as “a passionate team of AI experts, educators and
builders…” (Y Combinator, 2024b) and expresses a desire to “help students across
the world get better grades and find their true passion” (Y Combinator, 2024a).
Studdy’s expression of themselves as educators is not localised to America and
extends to students globally. The co-founders express their personal relationship with
this goal from their experience as “students that didn’t fit the mold of the one-size-fits-
most traditional educational system” (Y Combinator, 2024a). They hope the service
Studdy offers will provide students everywhere with the confidence to self-learn and
fill gaps when students are unable to follow classroom learnings (Studdy AI, 2024a).
1.2 Market Problem
Primary education outcomes are essential for determining key wellbeing outcomes for
students that flow into adulthood (Queensland Government, 2021). In Australia, there
is an undersupply of teachers, particularly following the COVID-19 pandemic – labelled
a ‘generational crisis’ (Longmuir, 2023). Student attendance also appears to be
suffering with Australia’s student attendance level at 49.9% and 61.6% in 2022 and
2023 respectively, which is far below the pre-COVID level of 73.1% (Australian
Curriculum Assessment and Reporting Authority, 2024). Studdy highlight that even
moderate periods of missed classes can result in students being left behind and failing
to catch up to their peers or even standardised expectations of learnings (Queensland
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Government, 2021). These gaps in understanding are more problematic in the earlier
years of primary education, as fundamental and prerequisite understandings for
continued learnings are lacking (Queensland Government, 2021). With the
constrained, and already finite, contact time, students need to be able to continue their
studies at home to supplement their learning, improve content retention, and develop
work ethic behaviours (Lathan, 2024).
1.3 Product / Solution
Studdy offers a smart phone application intended to provide Artificial Intelligence (AI)
powered educational learning assistance labelled as “an AI tutor for every student”
(Studdy AI, 2024b).
1.3.1 Homework Assistance
Using the application, users can take photos of questions spanning a variety of
subjects including “math, chemistry, physics, biology, history, social sciences,
language, reading, and writing” and then rapidly receive detailed answers (Studdy AI,
2024b). Users can also ask follow-up questions regarding these answers or ask for
the response to be explained more simply (Studdy AI, 2024b). Utilising photos and
generating smaller sectioned responses increases the accessibility of the application
to students and the targeted capacity for learning and is a primary point of advertised
difference. However, it was found that these features are also available on competitor
services, despite Studdy advertising that it has this advantage over ChatGPT (Studdy
AI, 2024b).
The specific features advertised by Studdy include its ability to (Studdy AI, 2024b):
• Break problems down into simple steps,
• Provide personalised step-by-step explanations,
• Answer unlimited follow questions,
• Summarise pages,
• Test reading comprehension,
• Quiz students to test that they understand the ‘why’ behind work instead of
just regurgitating homework steps,
• Frame problems and draw relationships to student experiences, and
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• Customise the service it provides to the grade level and language of the
student.
These features are designed to assist self-learning and are advertised as being readily
accessible any time a student requires. Unlike teaching staff, which have limited
teaching hours and availability, Studdy can provide tailored support on demand. This
is advertised as being particularly useful during assessment times, when students are
often working late at night to finish assignments or conducting last-minute study prep.
Finally, the global intentions of the app are also evident in the service being currently
available in 20 languages (Studdy AI, 2024b), thus increasing its functionality.
1.3.2 Product Demonstration and Comparison 1
While the scope of this report is unable to assess the functionality of Studdy’s services
in languages other than English, an economics question from the ECON3430 Tutorial
12: Practice Problems has been utilised to compare to the answers provided in the
course. The original questions and solutions can be found in Appendix Item 1 and the
answered responses from Studdy and ChatGPT can be found in Appendix Items 2 and
3 respectively. The written format of the question was unable to be recognised by the
PhotoMath application and Chegg would not provide an answer without a paid
subscription.
Studdy and ChatGPT gave both different and incorrect answers to the part (i). It
appears that Studdy misinterpreted the question as the properties of market failures
rather than information goods, and ChatGPT explained the properties of public goods.
Interestingly, the two applications provided similar answers to part (ii). The discrepancy
in response to the provided tutorial answers is likely explained due to the specificity of
the example and difference in responses to part (i).
1.3.3 Product Demonstration and Comparison 2
To provide another demonstration of more straightforward questions, Q3 of the same
ECON3430 tutorial is used as the questions are now in a TRUE/FALSE format. The
original questions and solutions can be found in Appendix Item 4 and the answered
responses from Studdy and ChatGPT can be found in Appendix Items 5 and 6
respectively.
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In this question format, there is less variability in the primary correct responses, and
both AI tools were able to provide the correct binary responses to all components of
the question. While there is some variability in the more detailed explanation of the
answers, these do appear to be largely correct.
1.3.4 Product Summary
While factoring for some of the inaccuracies in the answers provided and considering
the rapid development in the AI space (Taylor, 2023), Studdy shows promise in being
able to provide a supplementary support to student learning. The primary limitation is
a potential over-reliance on these tools given the inaccuracy level and requirement to
cross-check sources and validate the information it provides (The University of
Newcastle Australia, 2024), especially when considering the specificity of responses
often required in meeting assessment criteria. There might also be concerns that the
use of these services may counteract learning outcomes if used in ways that replace
rather than supplement study (Yin, 2024). Thus, although the Studdy application can
be a supportive tool to learning, the analysis conducted does not suggest that the
application meets its advertised functionality or unique value proposition in its current
form.


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2.0 Consumer
2.1 Target Consumer
The target market for Studdy are global students “from K-12 through college” with a
secondary interest in promoting their service to the parents of students wishing to help
their child study (Studdy, 2024a).
When signing up for the app, Studdy asks users to profile themselves based on the
following categories:
• Primary School (1st -5th Grade)
• Middle School (6th – 8th Grade)
• High School (9th – 12th Grade)
• College
• Graduate School
• Vocational/Trade School
The utilisation of these categories is consistent with their American background but
does not illustrate inaccessibility to markets outside of America. This also suggests a
focus on ‘young people’ or those who are under the age of perhaps 25.
2.2 Potential Market / Demand
In 2023, 4,086,998 Australian students were enrolled in 9,9269 schools (Australian
Bureau of Statistics, 2024a). A breakdown of the 2023 Education Demographics is
listed in the table below.
Australian Education Demographics in 2021
(Australian Bureau of Statistics, 2022)
# of People attending Preschool 484,185
# of People attending Primary School
(Grades 1-6) 2,075,224
# of People attending Secondary School
(Grades 7-12) 1,629,624
# of People attending University or other Higher
Education 1,185,450
# of People attending Vocational Education 601,901
TOTAL 5,492,199

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Combined with Australia’s current and projected ‘Population Pyramid’ and population
growth (Australian Bureau of Statistics, 2024b) and governmental focus on increasing
domestic skills and productivity through training and education pathways (Clare et al.,
2024), the student population in Australia is expected to grow dramatically.
Similarly, in 2020, it was estimated that just under half of Australian children aged 6 to
13 used smartphones – a growing trend from previous years (Australian
Communications and Media Authority, 2022). This is mirrored in adult users with
smartphone penetration estimated in Australia to be between 80-90% and growing
across the decade (Hughes, 2023). This highlights a high percentage of the student
base may possess the necessary overlap of factors to promote use in Studdy’s
services. It also suggests a potential market in the millions of users in Australia that
increases considerably when looking at the global market, which is viable given the
language features. However, curriculum considerations may need to be further
considered and controlled for in the regional information presented.
The AI learning tool will offer a cheaper substitute to the in-person tutor market which
was estimated to be a billion-dollar industry in Australia in 2021 (Ayoub, 2021) with an
estimated average cost of AUD$29.59/hr (Kips Insights Team, 2022).
2.3 Traction
Please note that the values listed in this report section are not static and are accurate
at the time of writing.
2.3.1 Number of Users and User Ratings
The app is currently available on the Apple App Store and Google Play Store (Studdy
AI, 2024b). Current downloads of the Studdy app are compared to other strong
competitors in the market to provide a secondary review of demand and traction. While
the number of downloads is unfortunately only available on the Google Play Store, the
volume of ratings can be used as a proxy for the volume of users to partially
supplement this information gap.



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Application Google Play Store Apple App Store # of Downloads Rating (/5) Rating (/5)
Studdy 5K + (0 ratings) 4.7 (33 ratings)
Photomath
100M +
4.6
(2,996,324
ratings)
4.7
(12K ratings)
Chegg 5M + 4.0 (43,619 ratings)
4.6
(2.3K ratings)
ChatGPT 50M + 4.9 (1,768,145)
4.8
(62K ratings)

2.3.2 Social Media Following
The social media platforms TikTok, Instagram and X were used for comparison due to
Studdy’s use of them in its affiliate program (Studdy AI, 2024c). Research finds that
the most popular social media platforms in 2021 for teenagers are Youtube, Instagram,
Facebook and Snapchat with TikTok quickly increasing in popularity (eSafety
Commissioner, 2021). This limited scope of social media platforms targeted could
indicate an area for traction development.
TikTok Instagram X
Likes Followers Posts Followers Followers
Studdy 7038 214 18 153 260
Photomath 7.5M 411.8K 238 27.2K NA
Chegg 831.4K 38.4K 1,150 47.4K 54.7K
ChatGPT 224.2K 157.4K 55 239K 200.5K

2.3.3 Studdy Affiliate Program
The primary strategy for Studdy to gain new users is through their “Studdy Affiliate
Program” where it will pay individuals to generate promotional content on the media
platforms TikTok, Instagram and Twitter (X) and use the #studdyai (Studdy AI, 2024c).
The program offers these individuals either USD$40 for every new subscriber or
USD$6 monthly for each user who remains subscribed (Studdy AI, 2024c).
2.3.4 Secondary Promotion Strategies
Through invitation, Studdy offers an additional 20 free photos for a user and their friend,
without having to engage with the trial or paid service, when a user is successfully able
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to get their friend to install the app via the link generated (Studdy AI, 2024b). Studdy
also utilises the platform Discord, which is directly promoted on their app, to make
announcements, encourage interactions between users to generate traction, and to
request any new features (Studdy AI, 2024b).
2.3.5 Traction Review
Studdy’s social media presence and the volume of users is drastically smaller than its
competitors which is unsurprising given its recent entry into the market and lack of full-
time marketing staff (YC Combinator, 2024c). This is indicative of a relatively small
market share which is associated with new market entrants, however, there does not
appear to be the substantive growth that would be necessary to catch-up with its
competitors in the short-to-medium-term.

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3.0 Company
3.1 Founders and Key Personnel
The company has grown dramatically since launch progressing from the two co-
founders to a team of between six to eight and is currently in a hiring phase to continue
growth (YC Combinator, 2024a). Only minimal information is available on the Studdy’s
staff beyond Michael Lam, the Co-founder and CEO, and Alex Lanzoni, Co-founder
and CTO.
3.1.1 Co-founder & CEO – Michael Lam
Michael Lam appears to be the primary founder of Studdy (YC Combinator, 2024a).
Lam’s previous experience includes numerous years as a software project manager
after working as a software engineer (Lam, 2024). More specifically, this includes a
one year and two-month tenure as a ‘Sr. Product Manager – AI Tutor’ at Speak and
one year and 8-month tenure as a ‘Sr. Product Manager’ at Photomath. As these roles
directly preceded his founding of Studdy, and are at competitor services, it illustrates
continuous work in the related industry and direct involvement in projects with similar
role intentions and value-add.
3.1.2 Co-founder & CTO – Alex Lanzoni
Alex Lanzoni is a self-taught software engineer and advertises he has 11 years of
experience in developing and maintaining web applications and services (Lanzoni,
2024). He illustrates a strong passion for self-learning, given his educational
background, and his experience as a software engineer highlights his investment and
capacity to contribute to Studdy’s success.
3.2 Personnel Management & Hiring
Studdy currently has 3 active job ads listed on the YC website for the roles of ‘Product
Manage/Biz Ops #1’, ‘Founding Engineer’ and ‘Marketer #1’ (YC Combinator, 2024a).
A snapshot of the positions and advertised responsibilities can be found in Appendix
Item 1 with key aspects highlighted. From an analysis of these job advertisements, it
is apparent that Studdy do not currently have a clear understanding of future
organisational requirements or is at least unable to present them in their job
advertisements. The role requirements are relatively vague with frequent references
to a requirement for a ‘generalist’ who may also have to pick up ‘random’
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responsibilities as they arise (Y Combinator, 2024c). This corresponds with a period
of significant organisational growth and an understanding that the organisation may
not currently possess some of the necessary skills to facilitate that growth, such as a
full-time marketer (Y Combinator, 2024c).
A learning culture of development is indicated in the expression of a perk in joining “a
fast-growing company and learn in a fast-paced environment” with opportunities for
mentoring (Y Combinator, 2024d). There is also a expression of developing
psychological safety between workers in the expression of “a tight knit team” that can
“bring out full selves to work” as well as a culture of “openness, transparency, and
collaboration” (Y Combinator, 2024b) – an important factor in the modern workplace
(Moore, 2022). Combined with the relatively loose role descriptions that promote
autonomy in decision-making, the advertised culture also suggests a decentralised
decision-making process. The ability to unite the Studdy employees under the banner
of a capacity to generate ‘social impact’ (Y Combinator, 2024c) is also likely a positive
component of developing good culture that has the potential to remain competitive and
capitalise and find new growth opportunities (Mennel, 2024). However, not enough
information is publicly available to assess the validity of these statements or make
assessments of the organisational structure. If true, Studdy may be able to attract and
retain the appropriate talent it needs to be effective. Though some concerns arise
regarding Studdy’s formalised HR structures, which are necessary for sustained
development (Abbas, 2023).
3.3 Ownership
There is only minimal public information available on Studdy’s ownership with some of
it conflicting. Studdy’s company LinkedIn profile states that it is still in the ‘Pre-seed’
funding stage with the last round on August 6, 2023, where it raised USD$2.3 million
from a total of 7 Investors (LinkedIn, 2024). Pitchbook (2024a) presents that Studdy
has 8 key investors including K20 Fund, MPG Fund, Neer Venture Partners, Pioneer
Fund and Trac (San Fransisco) of which all have a minority holding raising USD$500K
funding. It is also unknown what percentage of the business the two co-founders hold.

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4.0 Market Structure
4.1 Market Structure & Density
As with any software there are significant barriers to entry represented by the
necessary initial software development and required capital. This includes the creation
of the software itself, passing through the necessary checks to become available and
verified on the primary distribution platforms, as well as data security measures and
product testing (Odnorozhenko, 2023). For Studdy, which charges relatively small
subscriptions fees, increasing the amount of users through brand awareness and
downloads will be important in generating a return on this high fixed cost and
generating profits.
The smartphone application market is highly saturated with an estimated 109.3B
downloads on the Google Play Store and 40.3B downloads on the Apple App Store in
2022 (Odnorozhenko, 2023). With this intense competition, apps are often
distinguished based on differentiated features from stock, and often freely available,
applications combined with brand awareness, relative cost-to-reward trade-off,
simplicity and app security (Odnorozhenko, 2023). There are often low or no costs to
switching for users, further generating competition.
As established in section 1.3, Studdy’s features are not entirely unique with its main
direct competitor ChatGPT, which is a free service. Photomath has an advantage over
Studdy in that its parent company is Alphabet, which is shared by Google and has
some of its features and components integrated into the broader Google Services. It
also had an estimated 659 employees as of 2022 (Pitchbook, 2024b) which also
suggests that it possesses significantly greater organisational and functional supports.
Similarly, as established in sections 2.2 and 2.3 of this report, Studdy’s current market
share is extremely small when compared to its primary competitors.
4.2 Macro Trends
AI is becoming more prevalently used and accepted in a range of contexts, including
the workplace and education (Marr, 2024). However, there remains significant
scepticism towards the emerging technology due to concerns regarding
misinformation (Kleinman,2024). This is particularly topical in the education sector,
with AI concerns regarding plagiarism, with different institutions having different
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positions regarding its acceptable use and relevant penalties for misuse (Open
Universities Australia, 2024)
4.3 Legal/Regulatory Environment
As data breaches become more prevalent, and people become more concerned about
cybersecurity, legislation is being considered to help ensure the robustness of data
security (Australian Cybersecurity Magazine, 2023). It is estimated that each data
breach in Australia cost AUD$4.03M million in 2023, and detection in escalation costs
were AUD$1.68 million (Australian Cybersecurity Magazine, 2023). Within Australia
there has also been considerations around the potential introduction of stronger age
verification methods to restrict minors accessing certain information on the internet
due to the perceived developmental harm through mediums such as social media
(Lavoipierre,2024). While Studdy’s services are relatively separate from these
concerns due to the lack of direct messaging features and controlled information
presented, they do actively engage with social media platforms such as TikTok,
Instagram, X and Discord. This secondary exposure through apps that already have
their own legislative and regulatory engagements, alongside the general threat of data
security, is a concern for Studdy, as with any software company.
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5.0 Business Model
5.1 Company Business Plan
Studdy makes money through offering a paid subscription service through its
smartphone application.
5.2 Pricing Structure
The below information was taken directly from the smartphone applications of each
service.
Price Per Month Price Per 6 Months Price Per Year
Studdy $8.49 $66.99 ($5.58/month)
Photomath $14.99 $78.99 ($13.17/month)
$96.99
($8.09 per month)
Chegg $20.99
ChatGPT $33.99

5.2.1 Studdy’s Pricing Structure
Studdy initially offers a free trial version of the app for 7-days before introducing a paid
service (Studdy AI, 2024b). The trial is used to help eliminate some of the
characteristics of an ‘experience good’. Given the price sensitivity of its target market,
the trial helps to mitigate the adverse selection problem by reducing information
asymmetry between Studdy, the seller, and the user, thus incentivising purchase and
engagement. Before the trial period is utilised, or a paid service is engaged, only ten
photos can be taken in the app to then use to solve questions. The paid service offers
“unlimited snaps” and “unlimited messages”, thereby removing this restriction. Studdy
does not engage in price discrimination as it does not offer any discounts based on
demographic characteristics. However, a quantity discount is available when
purchased for an extended period. This approximately 34% discount is likely used to
secure more sustained revenue as the application is further developed. Data is not
publicly available on the volume of sales associated with each subscription method to
ascertain the impact of the quantity discount or the elasticity of demand.
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5.2.2 Competitors Pricing Structure
Studdy’s primary competitors also generate revenue through a paid subscription
service of their product. However, it is important to distinguish that not all offer the
same services and cannot be compared directly like-to-like.
Photomath similarly offers a free version of their app alongside a paid version, titled
Photomath Plus’ for a trial period of 7 days. The free version of the app does not limit
the number of questions asked or photos taken but does offer more limited information
and solutions. Photomath Plus is advertised as having “complete textbook solutions”,
“animated tutorials”, and “in-depth explanations” that, like Studdy, aim to develop
understanding of the ‘why’ behind the steps instead of simply regurgitating process
(Photomath, 2024).
Chegg is only offered for AUD$20.90 a month with no trial or free version of the service
available (Chegg, 2024).
ChatGPT Plus offers access to more powerful versions of the AI model, allowing for
greater accuracy and functionality such as image generation (ChatGPT, 2024).
A primary aspect of a product in this market’s success is the accuracy of the service it
provides. ChatGPT often comes with a warning about its accuracy and there are
general industry concerns about the types of misinformation it can disseminate
(Kleinman, 2024). Some services advertise that the answers provided are verified by
experts (Chegg, 2024). This extra layer of manual verification beyond the AI learning
model indicates an additional cost that may factor into the pricing structure for
applications such as Chegg (Chegg, 2024).
It is important to note that, a part from ChatGPT which has a much larger value
proposition, all monthly subscriptions listed are cheaper than the average cost for an
hour of private tutoring in Australia.
5.2.3 Pricing Structure Review
Studdy is the cheapest of the competitors it is compared against. This could be
evidence of alignment with Studdy’s advertised intention to make its service very
accessible to generate social impact and bridge inequity divides (Studdy AI, 2024a).
Students are likely to be highly price sensitive, given that a lot of services are available
free online, and their disposable income is minimal. This is mirrored in Studdy’s ratings
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where a primary consideration outside of the quality of answers is the cost (Apple
Store Preview, 2024). There is also going to be likely diminishing returns to the quality
of the service given a baseline expectation of success. As long as students are able
to successfully answer the question, they are likely to be satisfied. It is unlikely that
the primary users of these apps are trying to become experts in the topics and are
more using this tool to meet the minimum standards of understanding to meet
assessment or homework requirements. However, it is important to note that if the app
gains a reputation for giving incorrect answers, it may undermine the service’s
potential success as users have lost credibility in its service, which is integral to its
value proposition.
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6.0 Valuation and Investment Advice
6.1 Assumptions
Assumptions
1 Studdy AI will have growth in the number of users
2 Studdy will be able to achieve 0.5% of Photomath’s downloads to be in-line with 10% of Chegg in 3 years
3 50% of Studdy’s users will have a paid subscription
4 The use of AI technology (in supporting learning) in schools and universities will remain acceptable
5 The public perception and demand for AI learning tools will continue to grow and be favourable.
6 Legislation will not be introduced that will block young people from accessing the service.
7 The interpretation power of Studdy’s AI will continue to grow alongside industry computation standards
8 The AI market share will grow by 28.46% in line with expectations (Statista, 2024)
9 The USD$2.3M funds raised estimated on LinkedIn is correct.
10 The company will growth at an average rate of 10% over the next 3 years

6.2 Company Valuation
Photomath was estimated to have a value of USD$550 million in 2023 during its
acquisition from Google in 2023 (Pitchbook, 2024b), indicating the potential for
Studdy’s growth given its broader feature base.
Looking at the current relative position of downloads on the Google Play Store, Studdy
is only at 0.005% that of Photomath. The assumption used is that Studdy will be able
to grow to 0.5% of Photomath’s users, or grow 100 times, in three years. This is
considered reasonably possible given the exponential growth of technology (rehabAI.
2024). and ability to capture additional users on the Apple App Store. The availability
of a free trials in the application provides a limitation in equating the number of
downloads to paid subscriptions. Using the assumption that 50% of users have a paid
subscription, expected revenue is approximately $2.123 million.
Number of Paid Subscriptions x Cost of Subscription = Expected Revenue
(0.5* 0.005 * 100M) = 250,000 paid subscribers * $8.49 = $2,122,500
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This is approximately 2.44% the estimated annual revenue of Photomath at $86.9
million (Growjo, 2024). A similar value of Photomath’s value in relation to Photomath’s
acquisition is approximately $13.43 million.
Given that Studdy is still in its start-up and seed-funding phases, a timeframe of three
years is given to meet this valuation estimate. The 28.46% industry growth rate plus a
company growth rate of approximately 10% will be used to discount the future
valuation to the present. This leaves the company currently valued at approximately
$3.13 million.
(1-0.2846-0.1)3 x 13.43 million = $3.13 million
This is likely a conservative estimate and will likely be marginally higher depending on
the material value of the current investment, which has varying estimates.
6.3 Recommendation
Given the growth in the industry, the high current and future demand for AI learning
tools, and environmental trends, investment in AI learning tools is recommended.
However, given the saturation of investment in the company already from the recent
pre-seeding rounds, the relative inaccuracy of the responses tested, and the
comparability of ChatGPT as a free service, Studdy’s value proposition is undermined.
The assumptions used in the valuation process are heavily reliant on Studdy’s growth
strategies, from which there does not appear to be much current success relative to
the industry incumbents. Although Studdy does represent some potential, the AI
industry wholistically, is facing significant growth in the immediate future. Studdy may
only provide a benefit in a few years which represents a risk and high opportunity cost
for current investment. Thus, investment is not advised.

7.0 Conclusion
Studdy does not represent a promising investment given the current market saturation,
inability to provide a unique value proposition, and relative cost of service. The many
unknown factors regarding their growth, poor use of social media platforms, minor
market share and minimal human resource structures and staffing relative to their
competitors, makes investment a high risk. The lack of certainty provided in the
ECON3430 Managerial Economics – Start-up Report
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company direction illustrated in their company ads undermines their viability for
investment, despite acknowledged growth potential. If considering investing in Studdy,
greater visibility could be sought on their organisational frameworks and growth
strategies and greater clarification on their differentiating features from ChatGPT to
provide the necessary assurances. Instead, the high market growth and broad
possibilities for AI investment suggest that other opportunities would provide a greater
return and illustrate too high of an opportunity cost to recommend investing.

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Breach%20Report
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https://www.abs.gov.au/statistics/people/education/schools/2023
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Australian Curriculum Assessment and Reporting Authority. (2024). Student
Attendance. https://www.acara.edu.au/reporting/national-report-on-schooling-
in-australia/student-attendance
Ayoub, S. (2021). The race to ace: how mass tutoring risks children’s mental health
and entrenching inequality. The Guardian
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how-mass-tutoring-risks-childrens-mental-health-and-entrenching-
inequality#:~:text=In%20Australia%20the%20tutoring%20sector,is%20a%20
ECON3430 Managerial Economics – Start-up Report
25

billion%2Ddollar%20industry.&text=The%20Australian%20Tutoring%20Asso
ciation%20reported,but%20is%20expecting%20a%20rebound.
ChatGPT. (2023, February 1). Introducing ChatGPT Plus.
https://openai.com/index/chatgpt-plus/
Clare, J., Aly A., & Chisholm, A. (2024, May 14). Building a better and fairer education
system for a future made in Australia Joint Media Release. Minister’s Media
Centre. https://ministers.education.gov.au/clare/building-better-and-fairer-
education-system-future-made-australia
eSafety Commissioner. (2021, February). Digital lives of Australian teens. Australian
Government. https://www.esafety.gov.au/research/digital-lives-of-aussie-
teens
GrowJo. (2024). Photomath Revenue and Competitors.
https://growjo.com/company/Photomath
Kip Insights Team. (2022, November 16). How much does tutoring cost in Australia?
Kip McGrath Education Centres.
https://www.kipmcgrath.com.au/insights/how-much-does-tutoring-cost-in-
australia
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Lam, M. (2024). Home. [LinkedIn profile]. LinkedIn.
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Lanzoni, A. (2024). Home. [LinkedIn profile]. LinkedIn.
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Students. University of San Diego.
https://onlinedegrees.sandiego.edu/education-inequity-and-homework/
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ECON3430 Managerial Economics – Start-up Report
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https://www.abc.net.au/news/2024-05-19/age-verification-internet-use-
children-online-pornography/103843886
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and-bad-news/?sh=744eae3472a3
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Pitchbook. (2024b). Photomath Company Profile.
https://pitchbook.com/profiles/company/159243-31#overview
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Y Combinator. (2024a). Studdy. https://www.ycombinator.com/companies/studdy
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https://www.ycombinator.com/companies/studdy/jobs/td5AM1C-founding-
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Y Combinator. (2024c). Studdy - Marketer #1.
https://www.ycombinator.com/companies/studdy/jobs/1YA7q07-marketer-1
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Yin, W. J. (2024, January 24). Will Our Educational System Keep Pace with AI? A
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pace-with-ai-a-students-perspective-on-ai-and-learning

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Appendix
Appendix 1: Extract of ECON3430 Managerial Economics Tutorial 12: Practice
Problems Q1 with Solutions



ECON3430 Managerial Economics – Start-up Report
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Appendix 2: Extract of Studdy AI’s Solution to ECON3430 Tutorial 12 Q1
While the original solution was generated through the smartphone application, it was
able to be shared and viewed on via a browser. The screenshots were taken from the
browser to provide more ease of view.


ECON3430 Managerial Economics – Start-up Report
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ECON3430 Managerial Economics – Start-up Report
31

Appendix 3: Extract of ChatGPT’s Solution to ECON3430 Tutorial 12 Q1
Sharing conversations with images is not yet supported from the ChatGPT
smartphone application. For ease of visibility, the same response that was originally
generated from a photo taken on the smartphone application was accessed and
captured from a browser.


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Appendix 4: Extract of ECON3430 Managerial Economics Tutorial 12: Practice
Problems Q3 with Solutions


ECON3430 Managerial Economics – Start-up Report
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Appendix 5: Extract of Studdy AI’s Solution to ECON3430 Tutorial 12 Q3
While the original solution was generated through the smartphone application, it was
able to be shared and viewed on via a browser. The screenshots were taken from the
browser to provide more ease of view.



ECON3430 Managerial Economics – Start-up Report
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Appendix 6: Extract of ChatGPT’s Solution to ECON3430 Tutorial 12 Q3
Sharing conversations with images is not yet supported from the ChatGPT
smartphone application. For ease of visibility, the same response that was originally
generated from a photo taken on the smartphone application was accessed and
captured from a browser.



ECON3430 Managerial Economics – Start-up Report
35

Appendix 7: Overview of Studdy Job Ads.
Key:
- References to broad scope of work and unclear role descriptions [red]
- References to rapid company growth [blue]
Product
Manager/Biz Ops
#1

(Y Combinator,
2024d)
Founding
Engineer


(Y Combinator,
2024b)
Marketer #1



(Y Combinator,
2024c)
Salary USD$100-$180K USD$150-$250K USD$100-$180K
Job Type Full-Time Full-Time Full-Time
Experience 1+ years 3+ years 1+ years
About the role We’re seeking our
first generalist
business hire. Since
we’re a 6-person
startup, this role will
be a bit different
from a typical
product or bizops
job. You may end up
wearing some hats
you’ve never worn
before (e.g. math
tutor). If you have
any interest in
starting a company
in the future, you
might find this job
fun.
We’re seeking a
founding engineer
to help us scale and
grow our nascent
but world-class AI
Tutor mobile app
(Studdy).

This is a senior role
and we are looking
for an independent
thinker who
appreciates
ownership,
accountability, and
high-velocity
environments.

We don't require a
particular domain
expertise. The ideal
candidate is a fast-
moving generalist
who is primarily
motivated by
building things with
positive impact, and
who is interested in
participating in
strategy at the
company level.

Our small team of
six is tight and we
We’re seeking our
first marketing hire
to help us up-level
our marketing.
Studdy is an AI
tutor app that helps
students of all ages
learn school
material and get
better grades -
regardless of their
learning style or
family background.
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36

put a lot of care into
what we’re making.
If this sounds
interesting please
reach out!
Responsibility • Find hard
problems and
solve them
with minimal
guidance
• Be a startup
athlete and
pick up skills
across many
different
domains
• Depending
on your
skillset, you
might be
asked to do:
data
analytics,
product
design,
prompt
engineering,
user
research,
online ads,
influencer
marketing,
partnerships,
recruiting,
financial
modelling,
product
strategy,
tutoring HS
students
(likely not all
of these but
some of
these)”
You will be doing a
lot of coding and
may be asked to
pick up things
you've never done
before (e.g. devops,
frontend, prompt
engineering,
machine learning).
Your main priority
will be to ship new
products at a high
velocity in order to
maximize our
company's rate of
product
experimentation
(and thereby our
rate of learning).

You’ll make key
architectural
decisions that will
become pillars of
the engineering org.
At the same time,
you’ll have to make
serious trade-offs to
balance speed of
execution with
quality. You’ll decide
what technical debt
is worth taking on,
what components
should be built
versus bought, and
when it’s worth
spending an extra
week to engineer a
solid foundation.
- [Ideally you tell us,
because you’re the
expert]
- Paid ads
optimization (apple,
google, tiktok,
meta)
- Influencer
marketing outreach
(messaging
influencers to
negotiate contracts)
- Be a startup
athlete and do
other random stuff
like user interviews,
partnerships,
product stuff




学霸联盟